Lets talk about the Calgary home rental market

[polak]

Yeah its terrible for someone looking to move out. I wasn't in a huge rush to buy. My plan was to save up a decent amount for a downpayment, move into a small cheap rental unit and then save up the rest over a year or two just so I can gtfo of my current living situation. Impossible with the rent prices out there. It costs more to rent a 2 bedroom condo then the actual morgatge payment with condo fees. It's ridonkulous.

[Red]

Originally Posted by Table 5

I think if anyone is planning to live in a place for 2-3 years minimum and has the down payment, you'd be a fool to rent instead of buying.

Our mortgage condo fees are $300 cheaper than what we would be paying for rent...that is if we could even find something like this. It's pretty ridiculous how insane the prices for rentals are these days....and I don't really see that changing soon.

That’s what you heard in Vancouver and Toronto a year ago. And now? Crickets.

RE is in a down cycle across the country. Especially condos. We will see it here too, we were never spared before, why would we be different this time around?

Considering the risk of market downturn/special assessments etc, I wouldn’t say that buying right now is the best idea.

Buy for 300K.
15K down
1400-1500 a month mortgage.
300 condo fees
2K property tax
Insurance

So you have roughly 35K in mortgage, plus another 12K or so for the other expenses. You gain a bit of equity.
Roughly the same as rent for 1500/month.

Now, if you need to move you need to include 10K for RE fees just to sell. And what if the condo is down 10%? Another 30K? What if it’s worse than that? Then you can’t sell, period.

If you don’t plan to move then sure, all bets are off. It may make sense long term. Short term? Rent is safer.

Just things to consider.

[polak]

My uneducated gut feeling makes me think a small suburban condo is the safest bet right now.

If people get in trouble during a potential downturn that seems like where they would turn?

Again... uninformed gut feeling.

[CaramonLS]

I was thinking of putting my condo up for rent in the Westbrook area, me and the GF are going to move in together, but the problem is, she has a rather large dog and it would need a back yard.

Hopefully the condo rent can cover how much the house is, but I was getting a little worried to be honest. I've seen people asking for 2k+ for a house without the basement.

[Bertuzzied]

I'm getting $1200 for a 525sq ft bachelor suite!!! insane!! I was originally renting it to a fellow cp'er for $795 4 years ago.

[CaramonLS]

Well now I am curious what my 2 bdrm, 2 bath 1050 sq ft condo will go for then.

[puckluck2]

Originally Posted by Bertuzzied

I'm getting $1200 for a 525sq ft bachelor suite!!! insane!! I was originally renting it to a fellow cp'er for $795 4 years ago.

The Ian White discount?

[Red]

Originally Posted by CaramonLS

I was thinking of putting my condo up for rent in the Westbrook area, me and the GF are going to move in together, but the problem is, she has a rather large dog and it would need a back yard.

Hopefully the condo rent can cover how much the house is, but I was getting a little worried to be honest. I've seen people asking for 2k+ for a house without the basement.

Factor in income taxes from your rental. That will shave 30/40% of your earnings. And don't forget capital gains on the condo. If you bought a while back you will be on the hook for any capital gains since the day you bought it. Not since you rented it. There is some maneuvering to get that cleared up.

[kaotik]

Originally Posted by User Name

Does anyone have any recommendations for a property managment company? I'm going to be renting out my place in the future and would like to find a good one. I'm also going to put a bit into it to increase its rental value, does anyone know if any of these property management companies will help advise on which ones are best to make.

Thanks!

EDIT: Anyone care to share their property management fees?

I use Premiere Executive for my rental properties (high end - furnished) - the management fees are quite high but they get premium rental rates (way more than I could get if I was trying to rent it on my own) and they get cleaners in every two weeks... My two units have pretty much been rented every day for the last 3 years...

[squiggs96]

Originally Posted by TheyCallMeBruce

just my opinion, but if you have good tenants right now, I suggest keeping the rental price the same. Good tenants are hard to find.

This times 100.

I have a rental condo in Burnaby that the couple has been there for 2 years and 3 months. They are on their third one year lease and I've kept the rent the same since the first day they've moved in. I never hear from them; the place is immaculate when I do an end of year inspection to see if anything needs repairing; they give 12 post dated rent cheques that never bounce. Because of BC laws I think I'm only allowed to raise the rent about $40 per month. That's not going to affect me either way, and I could lose the tenant over a rental increase. I'm sure if they moved out I could get $150-$200 more than I am currently getting, but with that comes the risk of tenants I don't like.

As long as they want to live there, I will keep the rent at $1,200 for a 635 sq ft one and den. I'm slightly cash negative on the year, but before amortization I have net income of a few thousand dollars. I take amortization equal to the rent to have nil income.

[squiggs96]

Originally Posted by Red

Factor in income taxes from your rental. That will shave 30/40% of your earnings. And don't forget capital gains on the condo. If you bought a while back you will be on the hook for any capital gains since the day you bought it. Not since you rented it. There is some maneuvering to get that cleared up.

This is not correct. Without getting into too much detail, as each situation is different, you likely won't have any rental income once you take amortization. You won't have capital gains on your unit from inception if you set it up properly. Since it's a principal residence right now, and would be converted to an income property, there are steps to take to eliminate, reduce or defer any potential capital gain.

My best advice is to talk with a trusted advisor on the topic, such as a fellow CA.

[Bertuzzied]

Originally Posted by puckluck2

The Ian White discount?

hahaha. actually come to think of it i have no idea why i didn't round it to $800....

must be info ingrained from my U of C marketing class.

[Red]

Originally Posted by squiggs96

This is not correct. Without getting into too much detail, as each situation is different, you likely won't have any rental income once you take amortization. You won't have capital gains on your unit from inception if you set it up properly. Since it's a principal residence right now, and would be converted to an income property, there are steps to take to eliminate, reduce or defer any potential capital gain.

My best advice is to talk with a trusted advisor on the topic, such as a fellow CA.

I would like to see an explanation, if you don't mind.
How does he stick handle thorough this and meet the objective of having rental money to pay for a new place? All that without being taxed on the income.

I did mention that maneuvering is required to escape capital gains. I was just making him aware of the need to do this. Otherwise you are on the hook for capital gains.

[squiggs96]

Originally Posted by Red

I would like to see an explanation, if you don't mind.
How does he stick handle thorough this and meet the objective of having rental money to pay for a new place? All that without being taxed on the income.

I did mention that maneuvering is required to escape capital gains. I was just making him aware of the need to do this. Otherwise you are on the hook for capital gains.

Quick example with annual totals:

Rent $12,000

Interest charges $6,000
Property taxes $2,000
Other expenses $1,000

Earnings $3,000

Take amortization equal to earnings of $3,000 to reduce rental income to nil. (Side note: you cannot create a loss by taking more amortization than your earnings figure.)

Here you have positive cash flow, dependent on your mortgage, and positive earnings that get reduced by amortization to have no rental income to report. Yes you have to report all your activity on your T1 (if held personally), but there are no taxes payable because of it. When you sell your place there will likely be capital gains and recapture on the amortization, but I'd rather pay the taxes at that time, when I have positive cash flow from the sale.

It's likely just my preference, but I wouldn't use the word maneuvering. Instead I'd choose planning. You are allowed to take full advantage of the tax laws. Any fees paid to help with the set up of turning a residence into an income property are also usually deductible against your income.

[Red]

Originally Posted by squiggs96

Quick example with annual totals:

Rent $12,000

Interest charges $6,000
Property taxes $2,000
Other expenses $1,000

Earnings $3,000

Take amortization equal to earnings of $3,000 to reduce rental income to nil. (Side note: you cannot create a loss by taking more amortization than your earnings figure.)

Here you have positive cash flow, dependent on your mortgage, and positive earnings that get reduced by amortization to have no rental income to report. Yes you have to report all your activity on your T1 (if held personally), but there are no taxes payable because of it. When you sell your place there will likely be capital gains and recapture on the amortization, but I'd rather pay the taxes at that time, when I have positive cash flow from the sale.

It's likely just my preference, but I wouldn't use the word maneuvering. Instead I'd choose planning. You are allowed to take full advantage of the tax laws. Any fees paid to help with the set up of turning a residence into an income property are also usually deductible against your income.

How does that help him pay for the new place?

To quote Seinfeld about Kramer:
"it's easy to not pay income taxes when you have no income"

In the end I think you just re-confirmed what I told CS. Renting the condo out will not help you much, if at all.

[rd_aaron]

Originally Posted by Table 5

I think if anyone is planning to live in a place for 2-3 years minimum and has the down payment, you'd be a fool to rent instead of buying.

Our mortgage condo fees are $300 cheaper than what we would be paying for rent...that is if we could even find something like this. It's pretty ridiculous how insane the prices for rentals are these days....and I don't really see that changing soon.

That's surprising to me. I was living in a condo downtown that would've cost me about $300-$400 more than renting. I have now moved into a modern 1 bed + den condo in the inner city.

For the place I'm in now, the mortgage + tax would be about $1200/month.. condo fees are just under $400/month (0.45/sq ft for an 850 sq ft unit). I'm currently renting the place for $1400 and have seen identical units advertised for $1300. Once you add in maintenance costs, I'm paying a lot less than what I would've paid to own this place.

The owners (my landlords) are likely cash flow positive as they've owned this unit for a long time, so they likely bought it for well under what it's worth now, and they also likely remortgaged at a lower monthly payment. But to say anyone staying in a place for 2-3 years will make out financially ahead by buying instead of renting is an inaccurate generalization. There are properties in which this is true, but there are many properties where renting for 3 years will put you further ahead unless the market goes way up.

[polak]

Originally Posted by rd_aaron

That's surprising to me. I was living in a condo downtown that would've cost me about $300-$400 more than renting. I have now moved into a modern 1 bed + den condo in the inner city.

For the place I'm in now, the mortgage + tax would be about $1200/month.. condo fees are just under $400/month (0.45/sq ft for an 850 sq ft unit). I'm currently renting the place for $1400 and have seen identical units advertised for $1300. Once you add in maintenance costs, I'm paying a lot less than what I would've paid to own this place.

The owners (my landlords) are likely cash flow positive as they've owned this unit for a long time, so they likely bought it for well under what it's worth now, and they also likely remortgaged at a lower monthly payment. But to say anyone staying in a place for 2-3 years will make out financially ahead by buying instead of renting is an inaccurate generalization. There are properties in which this is true, but there are many properties where renting for 3 years will put you further ahead unless the market goes way up.

You'll be behind renting if you count the equity you would gain from owning over 2-3 years as your savings from renting are not enough to make up the gap through even the most successful investing.

[CaramonLS]

Originally Posted by Red

How does that help him pay for the new place?

To quote Seinfeld about Kramer:
"it's easy to not pay income taxes when you have no income"

In the end I think you just re-confirmed what I told CS. Renting the condo out will not help you much, if at all.

Well I mean I pay 1200 per month right now (inc fees) (in a good spot with my mortgage, but could potentially up the payments) + 2100 in tax per year.

I mean it would be nice to have an appreciating asset, not to mention a fall back plan incase things don't work out with the GF.

I mean I'm already paying $ each month anyways. So I don't expect my rental to cover the the full cost. I have owned it for 2 years now.

[The Yen Man]

Originally Posted by Red

How does that help him pay for the new place?

To quote Seinfeld about Kramer:
"it's easy to not pay income taxes when you have no income"

In the end I think you just re-confirmed what I told CS. Renting the condo out will not help you much, if at all.

Well, in that scenario, you still end up with $3,000 in real cash, that can be put towards the house. If he's moving in with his gf anyways, and they can support it, I'd argue it's worthwhile to rent it out. You're basically getting someone else to gradually pay off your mortgage.

Yes, you have to pay capital gains on the property, but that's from the date the property is declared a rental property, not at the date the condo was bought. Besides, if in fact you have to pay capital gains, that means you came out ahead on the property. I joke with my friends all the time, I wish I was able to pay half a million in capital gains. That would mean I made a killing that year in taxable income.

[SilverGS]

Yup great market for landlords right now. My renters decided not to renew the lease and I had less than a month to find someone. Had lots of interest and when I checked average rent in the area I was surprised it had increased 10% over last year.